Nigeria scraps state oil company

Thursday, 30 August 2007, 14:35 GMT 15:35 UK

Umaru Yar'Adua has brought in many reforms since being elected

Nigerian President Umaru Yar'Adua is to scrap the state-owned oil corporation and restructure the industry.

A national energy council will instead be established to oversee the notoriously corrupt oil sector.

The council, headed by the president, has six months to create five new organisations out of the Nigerian National Petroleum Corporation (NNPC).

Nigeria is the world's eighth-largest exporter of crude oil but relies on imports for its fuel needs.

There are often fuel scarcities and the subsidised price of fuel is regularly flouted.

The country loses millions of dollars of oil through illegal sell-offs, and reform of the oil sector is one of the newly-elected government's key aims.

Conflicting roles

The BBC's correspondent in Lagos, Alex Last, describes the NNPC as a behemoth of an organisation.

It produces crude oil in partnership with foreign oil companies, but also imports fuel and acts as a regulator and administrator of the oil sector.


With so many conflicting roles, the NNPC became synonymous with massive mismanagement and corruption, our correspondent says.

Unions and opposition parties have criticised the NNPC for a lack of transparency over imports and exports worth billions of dollars each year.

The new reforms were recommended by a government report seven years ago but never implemented.

However, there is some scepticism and it will take time before it is clear whether the reforms will bring real change or whether they turn out to be simply cosmetic, our correspondent says.

Source: BBC NEWS


PS: What do you think?

Nigeria scraps state oil company

PS: What do you think?

If that is what is needed to clean the place up, then so be it. I am happy that the new president is proving to be a bold man who is willing to take unpopular but necessary decisions. That is the sign of a true leader.

I am assuming that NNPC will retain its role as a joint venture partner in oil production.

NNPC should perhaps get out of the business of importing refined fuel, distribution, and retailing. And regulation should be done by an outside regulatory agency.

Nigeria is the world's eighth-largest exporter of crude oil but relies on imports for its fuel needs.
Need a few refineries:cheers:

Need a few refineries:cheers:

^^
It does have refineries, only that they were dormant for most of the past years under military rule. But im sure they are being revived by private investment eg. by the Dangote group.

Nigeria bids to build global oil group

By Matthew Green and Dino Mahtani in London

http://media.ft.com/cms/6f68385c-882a-11da-a25e-0000779e2340.gif

Published: August 31 2007 18:23 | Last updated: August 31 2007 18:23

Nigeria has announced plans to transform its near-bankrupt state-owned oil company into a global player.

The aim is to break a legacy of corruption and mismanagement and thrust the business into the ranks of increasingly influential national energy companies.

Analysts say the Nigerian National Petroleum Corporation (NNPC), a majority partner in the country’s joint ventures with established multinationals, has long served as a reservoir of cash feeding Nigeria’s venal political system.

But this week, the government of Umaru Yar’Adua, Nigeria’s new president, said it would break the company into several units as part of plans to define responsibilities, increase public scrutiny and seek private finance sources. The idea is to turn NNPC’s amorphous structure of regulatory and business arms into a company that could tap international markets, acquire assets and assert more control over the nation’s vast oil reserves.

Officials have made comparisons between the future Nigerian entity and companies such as Russia’s Gazprom and Brazil’s Petrobrás, which are at the forefront of the trend of national concerns challenging the dominance of the leading international oil companies. “We see ourselves competing with the other national oil companies which have left us so far behind,” said Levi Ajuonuma, an NNPC spokesman. “We haven’t grown as we should have, but it’s better late than never.”

The future National Petroleum Company of Nigeria (Napcon) will sit alongside new industry bodies, including independent regulators, a downstream organisation and an assets holding company. Napcon’s finances will be separated from the state’s, and the company will manage its own funding – a change analysts say will encourage greater transparency.

Jackson Gaius-Obaseki, a former head of NNPC, said the restructuring amounted to a salvaging exercise for a company on the point of collapse. “The capability [of NNPC] to hold together no longer exists,” he said.

The company, which has a 1.4m barrels a day share of Nigeria’s overall production, has been drained by government subsidies on imported petrol and years of abuse by political rulers, say analysts.

In July, Mr Yar’Adua told the FT he wanted to foster greater NNPC accountability . His predecessor, Olusegun Obasanjo, promised change but delivered little.

The company wants to complete the reforms in six months, but an entrenched network of vested interests – from contractors to bureaucrats who benefit from the status quo – may get in the way. “A lot will depend on those who are appointed,” said Mr Gaius-Obaseki

The reforms also aim to strengthen Nigeria’s hand in dealing with international oil companies operating in the country, particularly as production contracts signed away cheaply during military rule in the 1990s are coming up for review. The contracts cover some of the biggest multinational oil investments in the country.

The changes could also allow Nigeria to develop gas reserves for use in its chronically underdeveloped power sector, as opposed to remaining focused purely on export .

Copyright The Financial Times Limited 2007

Source: http://www.ft.com/cms/s/0/f963adb2-57e4-11dc-8c65-0000779fd2ac.html